Far East inks deal to sell Tuas industrial asset for S$322 million

[SINGAPORE] Property heavyweight Far East Organization has inked a deal to sell four single-storey warehouse buildings on a site of 1.17 million square feet in Tuas for S$322 million.

This translates to about S$110 per square foot per plot ratio, based on the maximum gross floor area (GFA) of 2.93 million sq ft allowable for the site, which has about 30 years’ balance lease.

Located at 10, 20, 30 and 40 Tuas South Street 1, the property has substantial redevelopment potential.

The total GFA of the four buildings is about 608,000 sq ft.

Last month, Far East, via Transurban Properties, signed a sale-and-purchase agreement to sell the property to a consortium led by Singapore-incorporated HPC Realty, a wholly owned subsidiary of HPC Holdings, which is listed on the mainboard of the Stock Exchange of Hong Kong.

Headquartered in Singapore, the group is involved in civil engineering and general building construction, including major upgrading works in the city-state.

HPC Realty has a 47 per cent shareholding in StarNova Capital, a joint venture (JV) formed to acquire and redevelop the Tuas property.

Another JV shareholder is Singapore-based integrated logistics, warehousing and supply-chain solutions provider CWT, which has a 25 per cent stake.

CWT was privatised by HNA Belt and Road Investments (Singapore) and delisted from the Singapore bourse in 2017. Today, it is an indirect wholly owned subsidiary of Hong Kong-listed CWT International.

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There are two other shareholders in StarNova Capital.

The first is a Singapore-incorporated company, Lexing, which holds 23 per cent. Lexing is controlled by Wang Zeya, who owns Ding Zhou Investment, which is involved with real estate investment in Asia and Australia.

The remaining shareholder in StarNova Capital, with 5 per cent, is Oliver Ong’s fully owned company, O2 Realty. It is principally engaged in the management of real estate and management consultancy services.

Condition precedent

HPC, in an announcement dated Mar 27, the same date the sale-and-purchase agreement for the Tuas South properties was signed, said that the JV agreement and the transactions contemplated under it are subject to approval by HPC’s shareholders at an extraordinary general meeting.

The JV company is looking to sell a portion of the property – possibly parts or all of the property on 10 Tuas South Street 1, about 23 per cent of the total site area – and use the sale proceeds to redevelop the rest of the site into a green logistics and industrial facilities hub, riding on the site’s proximity to the new Tuas mega port.

The redeveloped property is intended for eventual sale. That said, to boost the asset’s appeal to potential buyers, the plan is to lease it out first and establish its income-generating potential.

HPC is expected to be the main contractor for the redevelopment project. O2 Realty will be primarily responsible for leading the operation of the JV company and its subsidiaries.

Massively underdeveloped

The GFA of the four existing buildings at 10, 20, 30 and 40 Tuas South Street 1 reflects a plot ratio of slightly above 0.5. This is significantly below the 2.5 plot ratio accorded to the site under the Urban Redevelopment Authority’s (URA) Master Plan.

In January, Far East sold the nearby 51 Tuas View Link, on a 456,810 sq ft site area, for S$121.1 million to a JV between PGIM’s real estate business and Northstar Capital Logiprop.

Currently on the site are two blocks of single-storey warehouses with mezzanine levels; the existing GFA is 323,831 sq ft.

The asset will be redeveloped into a five-storey, full ramp-up logistics facility with about 1.1 million sq ft of GFA.

That asset is also on a site with a 60-year leasehold tenure from July 1996 and zoned Business 2 with a 2.5 plot ratio. Business 2 zoning allows both light and heavy industrial activities, and warehousing.

Both transactions are part of Far East’s strategy to shed non-core assets and recycle capital.

A key selling point of both assets is that the respective site leases were not issued by JTC Corporation, and hence not restricted by the agency’s policies on assignment of lease and subletting. This made them attractive to a wider pool of potential buyers.

Another similarity between the two properties is that they are substantially underdeveloped. Their respective existing GFAs reflect plot ratios of below 1.0.

The site on which 10, 20, 30 and 40 Tuas South Street 1 stand was part of a bigger land parcel of 1.37 million sq ft, which Far East clinched at a URA tender that closed in February 1996.

The group redeveloped the remaining land into The Westcom, a six-storey strata industrial building.

Similarly, the 51 Tuas View Link plot was part of a larger site of about 969,700 sq ft which Far East bagged at a URA tender that also closed in February 1996. The group developed the remaining land into the Tradelink Place project, which is fully sold.